Finance ministry looks at ETF route for disinvestment

The finance ministry is mulling an exchange traded fund (ETF) for selling shares of state-owned companies as part of steps to meet the disinvestment target of Rs 30,000 crore in the current financial year.

"The Disinvestment Department is considering setting up of an exchange traded fund in the format of Hong Kong Tracker Fund and has floated a concept note for implementing it," a top official in the Ministry told PTI.

The department is planning to create a pool of shares of the PSUs it wants to divest and create a fund (exchange traded fund), which would be listed on stock exchanges.

ETF, which is an investment fund traded on stock exchanges much like stocks, would have an underlying benchmark which could be an index on the stock exchange. The government has already identified a host of companies for disinvestment in the current financial year.

These include Hindustan Copper, Oil India, SAIL, BHEL, HAL and RINL.

The government is seriously pursuing this concept, after the offer for sale and institutional placement programme model, to meet the Rs 30,000 crore target.

Institutional placement programme and offer for sale are two new share sale tools introduced by the regulator Sebi in January this year, especially to help corporates increase their public shareholding.

These two models would also help companies achieve the minimum 25 per cent public holding guideline by June, 2013.

All listed companies are required to have at least 25 per cent public holding by June, 2013, while public sector units will have to meet it by August, 2013. There are about 13 PSUs which have to meet the minimum public holding guidelines.

The government has initiated the process of divesting stake in PSUs in the current fiscal and is expected to come out with an initial public offering of RINL by the end of this month.

The government had managed to raise only about Rs 14,000 crore through disinvestment last fiscal, against the Rs 40,000 crore target.